DJ30 – 12,403   up 8
US Treasury 10 Year Bond – 3.08%    down 0.06%
USDEUR  -  1.4137
Gold – $1520     down $5
Oil – $100.10    down $1.22

The only thing unusual here is the low for the 10 Year Treasury Bond.  More risk in the world means more money into US Treasuries – and it also means that the world does not think the US Dollar is going to tank soon.

Foreclosures, Foreclosures, Foreclosures…….

Homes sales of foreclosures are setting records right now.  Why is this?  Simple.  There are just a lot of people not paying their mortgage, and banks are taking them back.  As you remember, banks used illegal methods to get them back (robo-signing documents) and are being prosecuted and sued by various states.  However, they are cleaning up their methodology, and getting more and more foreclosures out there – taking back the properties, and getting them on the market for sale.  These sales go for steep discounts compared to owner sales of homes.

Here is what is happening:

1. 28% of all home sales are foreclosure homes. – 6 times higher than a “normal” housing market.
2. The backlog is 3 years of foreclosure inventory.  It would take 2 years to sell the existing foreclosure homes, but with future foreclosures – the estimate moves out to 3 years.  (My person belief is that it will take much longer than 3 years to get all those foreclosures sold as the general economy continues in its malaise.)
3. 872,000 homes have been foreclosed on by banks and are in the bank’s ownership (REO) inventory – and remain unsold today.
4. BUT – there are so many more homes that WILL be foreclosed on.  A big category are the “untouchable” expensive homes that banks don’t want to foreclose on as they push all prices down below them.
5. Foreclosures in 1Q 2011 were sold at 35% less than privately sold homes.
6. OH had the biggest discounts.
7. NV had the highest percentage (53%) of homes sold being foreclosures.
8. CA and AZ had a percentage rate of 45% foreclosure sales.
   

Now let’s use our reasoning power and ask some reasonable questions.  If you were buying a home, would you want to pay what people are asking, or 35% less as the house down the street just sold for?  Obviously, you would want to pay less.  This is the big problem for homes sales across the USA.  So, if you are selling your home, you either start lowering the price of your home, or you wait longer to sell it – a tough choice for some people.  This is why home prices on average are falling in price.

If you are buying a home to live in, you are in a irrational state of mind – and you should recognize it.  If you are going to live in the home, you become irrational when it comes to choosing the home as you want (and must have???) certain features in the home.  If you are an investor, you are just looking for a rentable home that has the “right” features – like 3/2 with 1500 sq ft, nice kitchen appliances, nice bathrooms, nice neighborhood, etc. – fairly basic requirements.  So, there is a market for people who want to live in the home, and they might pay more – but a lot won’t pay more.

Jobless Claims……

The last week’s number was 426,000.  And, the previous week’s number was revised upwards – this happens regularly.  Last week’s number was greater than predicted by the best economic minds in America (saying that you shouldn’t be listening to them any time soon).  This is the 7th week straight with claims being over 400,000.

It doesn’t look good for the economy to be coming out of its poor economic conditions – especially for the workers of America – as the unemployment rate isn’t going to be coming down anytime soon.

1Q GDP……..

The first revision of the 1Q GDP came in today, and guess what?  It’s unchanged at 1.8% increase.  This is anemic at best, and a downward trend at worst – which points to a poor future.

The economists are pointing to increases for the rest of the year – but I wouldn’t hold my breath too long – you might turn red.

FED can do almost anything…….

The truth is now coming out at what really happened during the 2008 meltdown of our economic system.

The FED gave out $80B worth of loans to big banks at 0.01% interest rate for 28 days.  I sure wish I could get one of those loans.  I would put it in a Money Market Account and make a fortune on the interest – providing the loan was big enough.  I guess $1B would be big enough for me.

More seriously, do you want to know how corrupt this program was?  Well Goldman Sachs got a big loan for 28 days at 0.01% interest and could turn right around and give it back to the FED and get 0.5% interest for the same money.  This was just pure subsidy, and not a rescue of any sort.  (PS – that last comment came from a FED official, and not from me.)

Who got the money?  Well – how about Goldman Sachs (my favorite whipping boy, and the cause of this mess in the first place, in my humble opinion.)  Also, there were foreign banks like Credit Suisse, and Royal Bank of Scotland.  Incidentally, why does the FED bail out foreign banks?  Aren’t their own country’s central banks strong enough to support them?  Just a question to ponder.

Also, the FED didn’t include how much each bank got in loans – as they hate to give away any information in the first place.  What kind of national secret is the amount of money each bank got?

The FED acted under the “Single Tranche Open Market Operation” or STOMO.  Isn’t it fun getting lost in the jargon of bank-speak?  The Dodd-Frank law required the FED to make its loans public under this new law, but stated exactly which loan programs they meant – and they DIDN’T include the STOMO.  Why?  Well, as Barnie Frank lisps “I didn’t know it existed.”  So much for our public oversight officials being responsible…….  (Throw all the bums out in the next election…..)

Obama Budget Proposal…….

Last February, the President submitted his budget for next year to Congress.  Today, that budget was rejected by the Senate by a vote of 97 “against”, and 0 “for.”  I have never heard of this type of rejection before.

I am reporting this to you to indicate how out of touch the President and Congress is with America.  We are seeing politics as usual.

The Dollar gained over one cent today, and Gold lost $12 – providing another buying opportunity.

Oil and gasoline fell a large amount – probably on those speculator accusations coming out on manipulation.
 
In the news today…..

Durable Goods Orders – fell in June 2.5%, and this was lead down by commercial aircraft orders and auto sales.  In fact, durable goods orders outside of these two areas was up 1.1%.

Foreclosures – are continuing and are upsetting Congress.  Barney Franks threatened banks with legislation to allow judges to adjust monthly mortgage payments – IF the banks don’t start playing ball, and getting their promised 500,000 foreclosures completed by November 1.  It appears to me that Barney Franks learned his negotiating skills from the mafia – and he should simply be not re-elected next year.  What a loser.  The bank agreement was reached on Tuesday in negotiations with the US Treasury – and Barney was just trying to get some political points scored.

Here are the last numbers for today:
Dow Jones 30 Industrial – 9070 (down 26 points)
10 Year Treasury Bond – 3.66% (down 0.02%)
Euro – $1.4035
Gold – $930 (down $12)
Oil – $63.35 (down $3.88)
Gasoline $1.86 (down $0.06)